Ghana is ready to hedge the prices at which it purchases crude from the international market in a move to protect consumers from high prices. The hedge is an arrangement that enables a buying party (in this case Ghana) to buy a product (crude oil in this instance) at an agreed rate in future by paying a premium now to international insurance and oil companies based on a pre-determined maximum rate at which the country would buy the product. By this arrangement, when prices rise in future above that pre-determined rate, the country will still buy the product at the agreed rate (which will be lower than the going market rate). This means that consumers in Ghana can always buy the crude oil below that ceiling price but not above it and so, if such an arrangement were in place, Ghana would not have suffered the ravaging effects of paying high prices for petroleum products when prices skyrocketed to $147 per barrel in September 2007. The Chief Executive Officer of the National Petroleum Authority (NPA), Mr Alex Mould, told a section of financial journalists at Sogakope in the Volta Region that his outfit had prepared the necessary proposal and settled on the type and modalities of hedging that was good for the country. Mr Mould, who is an ardent advocate of a hedging arrangement for the petroleum sector, said hedging, could be likened to taking an insurance cover and was a necessary evil that the country must embrace. "It is more risky to do nothing. That we are not hedging and sitting on the fence is in itself very risky; we gambling with our future," he stated, adding that it would also protect the government from unplanned subsidies. He said hedging was the surest way to protect the country and her consumers from paying higher prices, but that particular price should be decided on. Having received Cabinet approval, the government had set up a technical committee, the Risk Management Committee, made up of representatives from the Ministries of Finance and Energy, Attorney General's Department, representatives from the petroleum service providers, industry experts, among others, to advise on the actual steps to take. Currently, the technical committee working in collaboration with the NPA, had identified five counterparts - the collaborating entities to help broker the deal. He named the counterparts as Standard Chartered Bank, PNB Paribas, Citi Bank, Shell and BP adding that discussions are taking place for selection for them to partner the government in arranging the deal. An investment banker, Mr Mould said the groundwork had been completed for the country to hedge. This included building capacity within the authority to handle the transaction, an ample demonstration of the fact that “we are ready to hedge". The country currently consumes an estimated 50,000 to 80,000 tonnes of crude oil per month, while the hedging would affect between 80 per cent and 100 per cent of the actual consumption." The suggested tenures of the 'call option' hedge include a revolving three months, six months, nine months and 12 months renewable period. Source: Daily Graphic